After Haruhiko Kuroda took up the position of Governor of the Bank of Japan, upping the odds of the central bank engaging in more aggressive stimulus, the Yen softened against its American rival.
The Japanese Yen exchange rate was in the region of 95.4400 Yen to one US Dollar as of 15:16 pm
The US Dollar, which was boosted by both the Cyprus uncertainty and positive US data, was able to achieve just over 95 Yen a Dollar before Asian markets closed and has edged up to the mid-95 range during European trade.
Although the Cypriot government’s rejection of the controversial bank deposit tax initially saw investors flocking to safe haven assets like the US Dollar, Swiss Franc and Japanese Yen, some risk appetite returned to the market after the European Central Bank pledged to support Cyprus until a new bailout agreement can be settled on.
Investors are now focusing on statements due to be issued by the US Federal Reserve at 18:00 GMT, including the central bank’s rate decision and economic projections.
Yesterday US building permits had their best result since mid 2008. This positive release follows several others, indicating that US economic recovery is gathering pace despite the fact that the nation isn’t yet enjoying the sustained labour market momentum policy makers want. Consequently, what the Fed says regarding the duration of the current round of quantitative easing will be of significant interest.
The Fed is widely expected to retain its present ultra-low interest rates, but if it surprises the market regarding QE the USD/JPY pairing could experience volatility.
Meanwhile, any indications that Kuroda will act as the market expects and introduce additional easing when the BOJ meets in April could trigger further Yen declines.